YouTube's New Ad Model: Channel Sponsorships

YouTube is rolling out a new ad model option for 96 YouTube Channels. Rather than selling television style ads to certain demographics, they will now sell full sponsorship for certain YouTube channels. The ads include display, overlay and pre-roll; so basically they will cover the entire page with an ad preceding the video. The annual price tag for sponsorship is around $4 to $10 million.

YouTube will cover cost of production for certain channel producers, and the producers themselves will share equally in advertising revenue, once YouTube recoups the original investment. Production costs range from a few hundred thousand to a few million for most channels.

YouTube has struck deals on the new advertising scheme with brands like Toyota, GM, AT&T, and Lowes. As part of the deal, buyers will also be investing in other videos, with their ads appearing in non-channel videos as well. The channel sponsor ads comprise just 20% of the total ad campaign revenue for investors, with the other content being run on the rest of YouTube's videos.

Unilever will be sponsoring Young Hollywood Network channel for a reported $10 million. Toyota is to sponsor Cafe Mom, Kin Community and Mom's View for $10 million, and GM will sponsor a package of automotive channels including Red Bull's action sports channel for $5 million. Chrysler, AT&T, and Lowes also have agreements, but details on those deals have not been released.

YouTube is asking brands to get on board for sponsorship of groups of channels as part of a package deal. According to AdAge, a one year exclusive contract in the music and pop culture categories would cost as much as $62 million a package. Sports would cost $40 million, and automotive would run you about $16 million.

This new advertising model comes after a recent redesign of the channels look for YouTube. As more attention is being shifted from television to online video entertainment, YouTube is trying to stay ahead of the game with improvements to their channels offering, giving a more professional feel to original content and offering new ad opportunities to investors.